Study On The Product Development Of Tax-Subsidized Healthcare Insurance

With the rapid development of the basic medical insurance, commercial healthcare insurance is becoming more and more important as the supplement of social insurance. However, the premium income of commercial healthcare insurance is still very low and has the potential to be increase. In order to encourage the development of commercial healthcare insurance and improve the health care system, the government comes up with the policy of tax subsidy for taxpayers who buy the commercial healthcare insurance.As a frequently-used fiscal policy, taxation plays an important role in adjusting the economic structure. In order to encourage the supply of insurance products, the country has implemented policy on insurance companies’business tax and income tax so that their expenditures can be reduced. This time, the policy targets on the taxpayers by make sure that the premium for the commercial healthcare insurance be tax deductible. As a result, the after-tax price of insurance can be lowered and the initiative and the demand for the healthcare insurance can be improved. According to the policy, the tax-subsidized healthcare insurance takes mid-medical expenses as the responsibility and the universal account as its pattern. On the one hand, the mid-medical responsibility can be linked up with basic medical insurance. On the other hand, the universal account can be a reserve for the expenditure after retirement and will help attract the consumers. Despite the low profit of the tax-subsidized healthcare insurance, companies has the necessity to get prepared for the designing of the products and the build-up of the profit-test model so that they can acquire more customers.In this background, this article designs the product form of the tax-subsidized healthcare insurance in detail. That is, the mid-medical responsibility will cover the hospitalization expenses which the insured pays at his own cost, and the premium will go into the universal account and accumulate for medical expenses and the premium for healthcare insurance after retirement. The article then describes the actuarial aspects of the product. I use a net-premium approach for the pricing of the product and the universal account will be daily-compounding. As a result, the model of the product has been built up. I set up a series of assumptions and use the asset-share approach for profit calculation. By calculating the premium and the account value of the universal account, predicting the future benefits and expenses outgo, I finally come up with the cash flow at the beginning, the middle and the end of the year, which are the key factors of the profit. Using the risk discount rate, I can finally get the present value of the profit and profit margin of the product. After that, the article makes an assumption of the new business mix in order to calculate the overall profit margin and profit signatures. Finally, by adjusting the basic assumptions, the product can go through a sensitivity test. According to the result, the profit is most sensitive for, the lapse rate, the morbidity and the retained spread, which are the key factor of the medical insurance and the universal insurance.According to the model process and the profit analysis, the product designed above can accord to the policy target of meager profit. However, the insurance companies will be under the pressure of the expense aspect. And the profit will be decreased by the regulation on the loss ratio. By rough estimate, the premium for the medical responsibility can be very high and the limitation on tax subsidy may not be enough for increasing the demand. As the result, the effect of the policy is still to be examined by the reality. Moreover, the regulation on the tax-subsidized healthcare insurance is now contradicting with the regulations on the universal insurance and on the healthcare insurance which has to be improved by the regulators.In a word, the article begins with the tax subsidy policy, analyze the effect of the policy in an utility method and build up a profit test model to calculate and analyze the profit margin of the product, which is the innovation of the article.